Britvic may renegotiate AG Barr merger after approval

By Mike Stones

- Last updated on GMT

Britvic may wish to renegotiate the terms of its merger with AG Barr, predicted Panmure Gordon
Britvic may wish to renegotiate the terms of its merger with AG Barr, predicted Panmure Gordon

Related tags Ag barr Ftse 250 index Britvic

Soft drinks firm Britvic may seek improved terms for its partnership with AG Barr, after the Competition Commission gave provisional approval for the merger today (June 11).

Both firms have welcomed the approval but City analyst Panmure Gordon predicted Britvic would press for renegotiation. Its analyst Damian McNeela said in a note: “We continue to believe that a merger of the two companies makes sense but we would expect Britvic to seek improved terms given the progress the business has made over recent months.”

The Competition Commission said the proposed merger would not represent a substantial lessening of competition. But the would-be partners are unable to begin the formal merger process until the commission publishes its final report on July 30 2013.

‘Not the wounded animal’

But how much more will AG Barr be willing to give up in order to facilitate the merger, questioned McNeela? “Arguably Britvic is not the wounded animal it was last year,”​ he added.

Britvic announced recently plans to cut costs​ by £30M a year by 2016. Panmure Gordon estimated that accounted for about £15M of the planned £40M merger synergies.

McNeela also noted Fruit Shoot’s positive return to the market, a lessening of concerns over net debt levels and the arrival of new ceo Simon Litherland who replaced Paul Moody.

The original merger terms were that AG Barr shareholders would receive 37% of the shares in the enlarged company with Britvic shareholders receiving 63%. “Based on current market capitalisations, this now looks more like 33% for AG Barr and 67% for Britvic,”​ said McNeela. “We believe that Britvic arguable deserves improved terms but it remains to be seen how much AG Barr are prepared to give up.”

Coca-Cola Enterprises profit warning

News that rival Coca-Cola Enterprises has issued a profit warning, blaming “unexpectedly persistent”​ weak macroeconomic environment, poor weather and intense competition was “not particularly encouraging” ​for both AG Barr and Britvic, which operate in the same market segment.

Panmure Gordon retained its ‘hold’ advice on both firms’ stock.

Investec analyst Nicola Mallard agreed that a merger was far from a foregone conclusion. “Britvic highlights it is in a “different place” to last summer, which, in our view, probably reduces the likelihood of a deal this time round,”​ said Mallard.

Britvic’s latest cost cutting plans could either signal management’s wish to go it alone or as an attempt to “set the debate around valuation”, ​said Mallard.

Investec upgraded its recommendation on Britvic stock to ‘buy’ on total forecast return of more than 10% and a merger deal being agreed.

‘Busiest time of the year’

Commenting on the provisional merger approval, Britvic’s chairman Gerald Corbett said: "We welcome the Competition Commission's provisional findings and await their final conclusions by the end of July. In the meantime, as we enter our busiest time of the year, Britvic’s management team, under our new chief executive, is focused on delivering its new strategy and continuing the trading momentum established in the first half of the year. 

Meanwhile, Richard Howitt, Labour Member of the European Parliament, has pledged to help fight the 230 job cuts planned at Britvic’s Chelmsford factory.

“I am confident we can make a convincing case for keeping the plant open,”​ Howitt told BBC News. “Britvic needed to rethink its threat of job losses.”

Related topics Drinks

Related news

Show more

1 comment

150 year History gone!

Posted by Jill Barker,

How can Gerald Corbett and any of the other board members sleep at night knowing that after making a substantial profit in the first quarter, through the hard work of their staff, they suddenly decide it's a good idea to make all these people in Widford redundant and run off to Hemel Hempstead. If they were making a loss I could understand it but they're not! Loyalty to your staff does not come into your heads I suggest?
In a few years time when the board lose their jobs (and they will!) they will be sitting smug knowing they will get a big pay off package, with no consideration of the damage they have done to all the poor people at Widford! Good luck to the people that have the front to take industrial action! Boycott Britvic drinks if it happens!

Report abuse

Follow us

Featured Jobs

View more


Food Manufacture Podcast

Listen to the Food Manufacture podcast